The ‘S.W.A.T. Guy’ Gauge Is Screaming Volatility

I have a clear indicator that tells me when markets are feeling uneasy. I call it the “S.W.A.T. Guy” gauge, and here’s how it works.

I live on a small horse ranch in Southern California, and I have the good fortune of having some great neighbors. My closest neighbor is a retired deputy sheriff, and former S.W.A.T. team leader.

In addition to being an all-around cool guy, he’s also the kind of neighbor you want, and the kind that’s always got your back. I also try to be that same kind of neighbor, and that’s why when he asks me about the equity markets and investing, I’m always there to try and help him make sense of it.

On Tuesday, when the Dow Jones Industrial Average was down about 400 points, I got a call from S.W.A.T Guy asking me what was going on, and what to do about it.

What I told him was this market is finally starting to see something that we haven’t really seen in about two years, and that is the return of volatility.

Last week, that volatility started to rear its head, at least on an intraday basis, as we saw big intraday moves last Wednesday, and then again last Thursday. Yet despite the intraday price action in the majors, when the final bell rang in each of those respective trading sessions, stocks basically had closed unchanged.

Then last Friday, stocks rebounded sharply, but that didn’t last. On Monday of this week, the selling resumed, with the Dow closing the session down 0.67%. Of course, the real selling took place Tuesday, with Industrials down some 1.37%, or 363 points.

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